Mistakes in tax returns happen and the ATO has some leeway to allow taxpayers to correct them. Chartered accountant GAIL FREEMAN helps a couple with a business tax return problem to get things straight.
Ming and Mei Lan discovered a mistake in a business tax return and came to see me, wanting to know how to correct it.
“Recently, the Australian Taxation Office (ATO) extended the amendment period for income tax returns for small and medium businesses to four years,” I told them.
“The time for making an amendment starts from the day on which the Commissioner gives a notice of assessment to you.
“This four-year period applies to income years that start on or after July 1 2024. To take advantage of the four-year amendment period, you need to be a small or medium business entity.
“In order to satisfy this requirement, you must carry on a business during the income year and either the aggregated turnover in the previous year was less than $50 million and/or the aggregated turnover for the current year is likely to be less than $50 million.”
I said they could amend the return, either online, using an accountant or you by completing a paper form.
“The ATO has said that if you complete the paper form, the amendment will be processed in 20 days,” I said.
“It’s worth mentioning that the ATO can decline your amendment request if they believe the requested amendment will result in the assessment not correctly reflecting your taxable income.
“There is also no change to the length of time you are required to keep your business records, so that you need to keep the records for five years from the date on which the record was prepared or obtained or from the time the transaction was completed, whichever is the later.”
Mei Lan said that while that was good to know, they needed help understanding how to correct GST, which was also wrong.
I replied that they also had a four-year period to amend their GST return from the day after they were required to lodge the GST return for the relevant period.
“If you do not make the amendment within this four-year period, you lose your entitlement to claim input tax credits,” I said.
“So timing is absolutely critical. This is an area where the Commissioner has no discretion to extend the time limit except where s/he believes that there is fraud or evasion where no time limit applies.
“There was a recent case where this matter was considered and it was determined that input tax credits cannot be claimed outside the period of four years after their due date. Therefore, it is important that all business activity statements are lodged on time.”
For the sake of completeness, I also mentioned to them that individuals had only a period of two years to lodge an amendment. That date starts from the date of the notice of assessment.
“So it is important to know the entity for which you are requesting an amendment.
“And also whether it is for GST or income tax and whether you satisfy the requirements for being a small or medium business to allow you the extended four-year period for an income tax assessment. Like everything else in tax, this is not straightforward,” I said.
Ming said they hadn’t realised that different time limits applied to different amendments.
“However, we think it is better that you do these amendments for us than that we try to do them ourselves,” she said.
If you need help with amending your business, personal or superannuation return contact the expert team at Gail Freeman & Co Pty Ltd on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au
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